Senators: Put Social Security In Stock Market

May 19, 1995|By Frank James, Washington Bureau.

WASHINGTON — While their respective parties clash over federal budget policy, two U.S. senators stood together Thursday to unveil a bold plan to rescue Social Security from future insolvency and boost what Americans save for retirement.

Among some of their more radical ideas, Sens. Bob Kerrey (D-Neb.) and Alan Simpson (R-Wyo.) proposed investing 25 percent of the current Social Security surplus in the stock market.

Their rationale? By increasing the return on the money, more would be available for benefits when Baby Boomers begin to swell the ranks of future retirees.

While the Social Security system currently runs surpluses, experts estimate that if nothing is done, the system will be insolvent by 2030.

Present law prevents Social Security surpluses from being invested in anything but Treasury bonds. But such securities generally have much lower returns than investments in the stocks of successful companies in growing industries.

"The problem is not one of ideology but of demographics," Kerrey said.

"Every year you wait (to change the current system), you either have to cut more in the way of benefits or you've got to look at tax increases to solve the problem," he said.

"It's not a problem that gets better with age, but worse."

Kerrey and Simpson also would permit working Americans to put a chunk of their Social Security payroll taxes into retirement accounts. The investment of this money would be controlled by the individual worker.

Last year, Kerrey co-chaired a presidential Commission on Entitlement and Tax Reform on which Simpson served. The panel failed to agree on final recommendations, but some of the ideas in the Kerrey-Simpson proposal are borrowed from concepts that commission members examined.

For instance, they proposed that the age of eligibility for Social Security be gradually raised over several decades to 70. It already is scheduled to rise gradually to 67.

The senators' plan also would reduce cost-of-living adjustments received by beneficiaries of Social Security and other federal retirement programs.

Kerrey and Simpson have reputations for not marching in lockstep with their respective parties.

That was obvious as they took up reforming Social Security while most of their colleagues focused on the budget.

"Our goal is not deficit reduction but strengthening Social Security," Kerrey said.

Also, leaders in both parties have essentially declared Social Security off limits since any legislative action resulting in reduced benefits is considered political suicide.

"We will be savaged from coast to coast and we're ready for it," said Simpson, chairman of the Social Security and Family Policy subcommittee of the Senate Finance Committee.

"If you want to just snort and whine and howl about this, that's fine," Simpson said in anticipation of criticism. "If you don't like it, give us an alternative . . . The present system is absolutely unsustainable."

Both senators said they have received encouragement for their proposals from others in their parties. Simpson cited support from the Republican leadership.